TY - JOUR
AU - Beber,Alessandro
AU - Brandt,Michael W.
AU - Kavajecz,Kenneth A.
TI - What Does Equity Sector Orderflow Tell Us about the Economy?
JF - National Bureau of Economic Research Working Paper Series
VL - No. 16534
PY - 2010
Y2 - November 2010
DO - 10.3386/w16534
UR - http://www.nber.org/papers/w16534
L1 - http://www.nber.org/papers/w16534.pdf
N1 - Author contact info:
Alessandro Beber
Cass Business School
City University London
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
E-Mail: Alessandro.Beber.1@city.ac.uk
Michael W. Brandt
Fuqua School of Business
Duke University
100 Fuqua Drive
Durham, NC 27708
Tel: 919/660-1948
Fax: 919/660-8038
E-Mail: mbrandt@duke.edu
Kenneth Kavajecz
Finance Department
University of Wisconsin- Madison
975 University Ave.
Madison, WI 53706
E-Mail: kakavaje@syr.edu
AB - Investors rebalance their portfolios as their views about expected returns and risk change. We use empirical measures of portfolio rebalancing to back out investors' views, specifically their views about the state of the economy. We show that aggregate portfolio rebalancing across equity sectors is consistent with sector rotation, an investment strategy that exploits perceived differences in the relative performance of sectors at different stages of the business cycle. The empirical foot-print of sector rotation has predictive power for the evolution of the economy and future bond market returns, even after controlling for relative sector returns. Contrary to many theories of price formation, trading activity therefore contains information that is not entirely revealed by resulting relative price changes.
ER -